Friday, June 10, 2011

Jun 9: In a move designed to draw attention to U.S. EPA's proposed air and climate rules, American Electric Power (NYSE: AEP) announced in a lengthy and detailed company press release its plan for complying with a series of proposed regulations which it said would impact coal-fueled power plants. AEP said that based on the regulations as proposed, its compliance plan would retire nearly 6,000 megawatts (MW) of coal-fueled power generation; upgrade or install new advanced emissions reduction equipment on another 10,100 MW; refuel 1,070 MW of coal generation as 932 MW of natural gas capacity; and build 1,220 MW of natural gas-fueled generation. The cost of AEP's compliance plan could range from $6 billion to $8 billion in capital investment through the end of the decade. The company said that high demand for labor and materials due to a constrained compliance time frame could drive actual costs higher than these estimates. AEP noted, "The plan, including retirements, could change significantly depending on the final form of the EPA regulations and regulatory approvals from state commissions."

According to the release, the retirements and retrofits in the plan are in addition to more than $7.2 billion that AEP has invested since 1990 to reduce emissions from its coal-fueled generation fleet. "Annual emissions of nitrogen oxides from AEP plants are 80 percent lower today than in 1990. Sulfur dioxide emissions from AEP plants are 73 percent lower than in 1990." The company currently owns nearly 25,000 MW of coal-fueled generation, approximately 65 percent of its total generating capacity. Coal would fuel approximately 57 percent of AEP's total generating capacity by the end of the decade.

Michael Morris, AEP chairman and chief executive officer said, "We support regulations that achieve long-term environmental benefits while protecting customers, the economy and the reliability of the electric grid, but the cumulative impacts of the EPA's current regulatory path have been vastly underestimated, particularly in Midwest states dependent on coal to fuel their economies. We have worked for months to develop a compliance plan that will mitigate the impact of these rules for our customers and preserve jobs, but because of the unrealistic compliance timelines in the EPA proposals, we will have to prematurely shut down nearly 25 percent of our current coal-fueled generating capacity, cut hundreds of good power plant jobs, and invest billions of dollars in capital to retire, retrofit and replace coal-fueled power plants. The sudden increase in electricity rates and impacts on state economies will be significant at a time when people and states are still struggling."

The company said although some jobs would be created from the installation of emissions reduction equipment, AEP expects a net loss of approximately 600 power plant jobs with annual wages totaling approximately $40 million as a result of compliance with the proposed EPA rules. Morris said, "We are deeply concerned about the impact of the proposed regulations on our customers and local economies. Communities that have depended on these plants to provide good jobs and support local services will face significant reductions in payroll and property taxes in a very short period of time. The economic impact will extend far beyond direct employment at power plants as thousands of ancillary jobs are supported by every coal-fueled generating unit. Businesses that have benefited from reasonably priced coal-fueled power will face the impact of electricity price increases ranging from 10 percent to more than 35 percent just for compliance with these environmental rules at a time when they are still trying to recover from the economic downturn."

"Although discounted by some, the potential impacts on the reliability of the transmission system, particularly in the Midwest, are significant. The proposed timelines for compliance aren't adequate for construction of significant retrofits or replacement generation, so many coal-fueled plants would be prematurely retired or idled in just a few years. AEP's compliance plan alone would abruptly cut generation capacity in the Midwest by more than 5,400 MW. Depending on the year, another 1,500 MW to 5,200 MW of AEP generation would be idled or curtailed for extended periods as pollution control equipment is installed," Morris said.

AEP said it has shared its compliance plan with PJM Interconnection, Southwest Power Pool and North American Electric Reliability Corp. for use in their evaluation of the impacts of EPA's proposed rules. Morris said, "We will continue to work through the EPA process with the hope that the agency will recognize the cumulative impact of the proposed rules and develop a more reasonable compliance schedule. We also will continue talking with lawmakers in Washington about a legislative approach that would achieve the same long-term environmental goals with less negative impact on jobs and the U.S. economy. With more time and flexibility, we will get to the same level of emission reductions, but it will cost our customers less and will prevent premature job losses, extend the construction job benefits, and ensure the ongoing reliability of the electric system."

U.S. Senator Joe Manchin (D-WV) issued a statement regarding what he said was AEP's "plans to shut down three plants in West Virginia, resulting in 242 lost jobs." He said, "Let me be clear, it's decisions like the one made by AEP today that demonstrate the urgent need to rein in government agencies like the EPA, preventing them from overstepping their bounds and imposing regulations that not only cost us good American jobs, but hurt our economy. Onerous regulations issued by the EPA are the reason that 242 West Virginians will lose their jobs, and that's simply wrong. It is because of out-of-control agencies like the EPA as well as the need to protect American jobs that I sponsored the REINS Act [Regulations from the Executive in Need of Scrutiny, H.R.10 & S.299]-- a commonsense measure that will help protect and create jobs by reigning in needless or burdensome regulations, and that will put responsibility back where it belongs -- in the hands of the people who are elected to govern and lead this great nation."

Access the AEP release with further details including a listing of plants that would be impacted (click here). Access a release from Sen. Manchin (click here). Access legislative details for S.299 (click here). [*Air, *Climate]